Ontario’s austerity policies self-defeating

Published on Mon, 2013-09-30 20:08

Ontario CCPA Director Trish Hennessy

There are many ways to tell a story. For Trish Hennessy, Ontario director at the Canadian Centre for Policy Alternatives, one way is to look at the most searched word annually for the on-line Mirriam-Webster dictionary.

Speaking at the Whitby Courthouse Theatre to a group of Durham-region New Democrats, Hennessy noted that in 2010 the most searched word was “austerity.” A year later it was “pragmatism.” In 2012 there was a tie between “socialism” and “capitalism. Clearly something is shifting,” she said.

Many young people are being left out of the post-recession recovery and are now questioning the economic and political system that is denying them their place in society.

Hennessy says Ontario is practicing a self-defeating logic with its austerity policies. While the Wynne government cuts jobs and freezes wages, they simultaneously expect there to be a consumer-driven economic recovery. How does that take place when for the majority wages are stagnant or in decline?

Looking at the period 1980-2009 the richest 20 per cent of Canadians had their real incomes (after inflation) grow by 38.4 per cent. For middle 20 per cent, their incomes remained flat – actually declining slightly by 0.3 per cent. For the poorest 20 per cent, their real income declined by 11.4 per cent. To even stand still the middle class is working on average 200 more hours per year.

This rise in inequality has a cost to us all – including worse health outcomes for everybody, including the wealthy.

One of the ways that we mitigate rising inequality is through government services. The average middle class family is estimated to benefit annually from public services valued at $40,000.

With each round of austerity, the services that are lost do not come back when better times return.

“It’s difficult politically to go back to where we once were,” she said.

Hennessy says that CCPA economists estimate that in Ontario alone tax cuts have cost the government $17 billion annually in revenue. Had that revenue not been given away, Ontario would have no need to be practising austerity. Nor would we have to wait until 2017 to balance the provincial budget — it would be balanced now.

Quoting Alex Himelfarb, formerly the most senior federal civil servant, Hennessy points out that it is a myth that cutting government is the solution to debt and low growth. It’s never in the history of the world worked according to Himelfarb.

While the Martin cuts in the mid-1990s have been credited with tackling Canada’s escalating debt, Himelfarb notes that it was strong growth in the U.S. economy that pulled us out of our fiscal situation, not Martin’s punishing cuts to services and transfers.

Hennessy observes that with each successive recession, the rate of inequality grows in the subsequent period of recovery.

Like the 1990s, recessions are used to scapegoat the poor, teachers, unions and social assistance recipients.

“The austerity narrative is divisive, turning people against each other,” she said.

These are not the lessons learned from the Great Depression where her parent’s generation learned that by working together anything was possible.

Hennessy says it is time to change the conversation. Austerity has been a distraction away from the real issue of growing social inequality.

We will soon have but two choices – to look at revenue options that can be leveraged to provide needed government services, or to decide what declining stand of living Canadians are willing to accept.

Despite a pledge by Federal NDP leader Tom Mulcair not to raise taxes, Hennessy says it is only fair that with the richest Canadians taking all of the economic growth that they should be asked to shoulder more of the cost through taxes.

In Ontario, a one per cent rise in the marginal rate for the wealthiest ten per cent would generate $639 million in revenue. Returning the corporate tax rate to 2009 levels would raise $2.5 billion. A one per cent rise in the HST would add another $2.6 billion. That would go a long way in reducing the current $9.8 billion provincial deficit.

Keep in mind that the Federal government already cut the HST by 2 per cent, and that a one per cent rise in the marginal rate for the wealthy would match the rate of increase for wealthy U.S. citizens after the Bush-era tax cuts expired.

There are certainly other choices. Gas tax has not gone up since 1991. A 10 cent rise at the pumps would add another $2 billion.

Hennessy doesn’t advocate that all these tax measures be implemented, and especially not at once, but they do suggest there are alternatives to cutting services relied upon especially by the most marginalized Ontarians.

“Taxes are the gift we give each other,” she says, noting that in an Environics polls paying taxes was among the top three answers when Canadians were asked what they do that feels good.

She says that Canadians are very pragmatic and have a long history of social responsibility.

Tax cuts have served to defer the infrastructure deficit to the next generation. The longer we defer addressing such issues, the more expensive it becomes. Climate change, including the floods in July, are now suggesting that we have little choice but to reinvest.

“It’s no longer even a political decision,” she said.

That infrastructure deficit also includes soft infrastructure. Hennessy points out that few know that Quebec has a successful day care program in which parents are asked to contribute $7 a day. That system pays for itself as more Quebec parents are able to return to the workforce and pay taxes.